Oncology Venture is a Denmark-based biopharmaceutical company focused on oncology. Its patent-protected mRNA-based drug response predictor platform enables the identification of patients with gene expression highly likely to respond to treatment. To date, the company has in-licensed six drug candidates with the intent to conduct focused Phase II clinical trials and then out-license the revamped drugs.

Oncology Venture is a research client of Edison Investment Research Limited

Oncology Venture announced on 4 September 2019 that it has appointed a new CEO, Steve Carchedi, former senior executive of J&J and Mallinckrodt. This comes at a critical juncture for the company as it moves its programmes into the late stage and starts to look for development partners to advance these assets. The company has made substantial progress getting LiPlaCis ready to launch Phase III studies with IND and IDE applications.

Oncology Venture is currently getting LiPlaCis ready to enter Phase III for metastatic breast cancer, and as part of this it applied for an IND from the FDA. The company previously received feedback from the agency in June on the IND application suggesting that the company move to a randomised trial design, albeit with the same enrolment (200 patients). The firm has since received approval for the IDE associated with the paired LiPlaCis drug response predictor (DRP) test to be employed in the Phase III trial.

LiPlaCis Phase II best cancer data still outstanding

Despite efforts to get the product ready for Phase III, the company has not yet finsihed Phase II and released the complete data on LiPlaCis for breast cancer. The trial has been expanded to include prostate cancer patients, but this should not affect the timeline for breast cancer. An interim readout on 12 patients was released in February, but this only includes a selection of readouts and no statistics.

Awaiting updates on irofulven and APO010

The company is also engaged in Phase II clinical studies for irofulven and APO010. However, in the most recent earnings report, the company noted that no patients have been enrolled into the APO010 study since it was initiated in May 2017. The irofulven study in prostate cancer is currently going to plan, but has not provided a readout yet. There are plans to open sites in Germany to accelerate enrolment, but these are currently on hold pending funding.

Valuation: SEK1,271m or SEK18.03

We have adjusted our valuation slightly lower to SEK1,271m or SEK18.03 per basic share from SEK1,302m or SEK18.47 per share, previously. We have delayed the commercialisation of LiPlaCis by six months and the irofulven, APO010 and 2X-111 (which has not entered the clinic) programmes by a year. We expect the company to need DKK360m (up from DKK310) to bring all its programmes to Phase III.

A new CEO

The company announced on 4 September 2019, that its CEO, Peter Buhl Jensen, would resign and be replaced by Steve Carchedi on 15 September 2019. Steve Carchedi is the former CEO of Apexian Pharmaceuticals and serves on the board of Sunesis Pharmaceuticals and BioNumerik Pharmaceuticals. He also formerly served as the CEO of Cornerstone Pharmaceuticals, with senior sales and marketing roles at Mallinckrodt, GE Healthcare, Endo Pharmaceuticals and J&J, among others. We believe that Mr Carchedi’s commercial experience is indicative of the shift the company is undergoing towards later-stage assets and their eventual commercialisation. His experience on a number of big pharma commercial teams may also prove useful when looking to out-license Oncology Venture’s assets. And finally, he is based in the US, which signals the shift in focus towards the US market as the company’s drugs approach late-stage trials. The company also announced that it hired a new CFO, Henrik Moltke, to replace outgoing Niels Laursen.

LiPlaCis: Regulatory progress, still waiting on Phase II

Oncology Venture intends to seek approval for LiPlaCis using a single pivotal Phase III clinical study. In June 2019, the company reported on feedback it received from the FDA on its IND application for LiPlaCis in metastatic breast cancer. The original proposal was for a single-arm, open-label study, but the FDA suggested that the company perform a randomised clinical trial. The company noted that the change does not affect the total enrolment or the timeline for the study. The company has amended and is resubmitting its IND to conform to this guidance. The company also noted that this clinical trial design would also presumably satisfy European authorities. Additionally, the company applied for an IDE for the DRP test associated with LiPlaCis, which was approved by the agency in August and was granted a European patent on the technology in June.

The company has also repeatedly stated that it believes LiPlaCis has the potential to seek a breakthrough designation, although this would depend on the data from the ongoing Phase II breast cancer study, which has not been released yet. The company noted in its Q219 financial report that the breast cancer study was still ongoing and has communicated that an update on the study will be provided following feed-back from the FDA. Feedback from management indicates that the company intends to run the breast cancer portion of the study until potentially after the pivotal study is initiated. We do not know if the company intends to release a complete data package prior to initiating the pivotal study.

The most recent data we have from the study are from February 2019, and do not provide a complete account of patient responses or other factors such as safety. The response rate was 33% (or four out of 12 patients) in the top one-third of DRP-selected patients (40mg/m2 LiPlaCis intravenously (IV) in three-week cycles on days one and eight). These patients achieved partial response (PR) or better. The top one-third of patients also reached a median time to progression of 18 weeks versus seven weeks in the remaining enrolled patients (who had DRP scores between 33% and 67%, as those below 33% were excluded from the study). Additionally, the company reported that 40% of patients in the upper 20% of DRP-selected patients who have not previously received cisplatin also achieved PR or better. For comparison, the microtubule inhibitor Halaven (eribulin mesylate, Eisai) approved in 2010 has a response rate of 11% in this pre-treated population.

OV increases stake in dovitinib

Dovitinib is another one of the company’s core development programmes. The company has engaged in a unique regulatory strategy in which it will use existing clinical data (from the drug’s previous life under Novartis) to seek approval on the basis of non-inferiority to sorafenib. We do not necessarily believe that approval on the basis of non-inferiority will translate into a market for the drug (and give no value to this alone), but it will likely streamline future approvals of the drug in combination with the DRP. The company is additionally developing a novel DRP that examines the response of patients to a combination of dovitinib and a PD-1 or PD-L1 inhibitor.

The company recently increased its stake in the compound to 63% (from 55%) at a purchase price of US$0.8m. Moreover, it renegotiated its option contract to allow for the company to buy up to 100% of the programme (85% previously) at US$0.1m per percentage point. The remaining portion of the drug is owned by Sass & Larsen, a company representing a private investor.

Irofulven and APO010 trials slow going

Oncology Venture also recently provided an update on its other development programmes in its financial report, including the assets irofulven and APO010. Neither of these drugs is what we would consider a ‘lead asset’ for the company, but both are currently being studied in Phase II clinical studies. In the report the company noted that the study of irofulven in prostate cancer patients is ongoing in Denmark and proceeding as planned, but it recently set up a collaboration to expand its clinical sites into Germany ‘in order to speed-up patient inclusion.’ However, the company also noted that opening the German sites is contingent on financing. The company also noted that it has had difficulty enrolling patients in the ongoing Phase II study of APO010. It noted that no patients have been enrolled in the study to date. We consider this programme stalled until further notice.

Valuation

We have adjusted our valuation slightly lower to SEK1,271m or SEK18.03 per basic share, from SEK1,302m or SEK18.47 per share, previously. We have adjusted a number of timelines to reflect the progress made to date on the individual programmes. Given the lateness of the report of clinical data on LiPlaCis, we have delayed the commercialisation of the product by six months. Similarly, given the lack of material progress on Irofulven, APO010 and 2X-111, we have delayed the commercialisation of these programmes by a year. Irofulven and APO010 appear to be in stalled clinical trials, as described above, and 2X-111 has not yet entered the clinic. Despite these adjustments, our enterprise value increased for the company (SEK1,291m vs SEK1,267m) due to rolling forward our NPVs. Our valuation is also lowered by the increase in net debt: SEK20.1m net debt, compared to SEK34.9m net cash previously.

Exhibit 1: Valuation of Oncology Venture

Development programme

Indication

Clinical stage

Prob. of success

Launch year

Launch pricing

Peak sales ($m)

rNPV (SEKm)

% owned by OV

OV rNPV (SEKm)

LiPlaCis

Metastatic breast cancer and metastatic prostate cancer

Phase II

25%

2023

$91,000

259.0

728.0

39%

283.9

Irofulven

Metastatic prostate cancer

Phase Ib/II

20%

2024

$129,000

52.4

69.4

100%

69.4

APO010

Multiple myeloma

Phase Ib/II

20%

2025

$146,000

75.9

89.6

100%

89.6

2X-121

Metastatic breast cancer and ovarian cancer

Phase II

25%

2023

$132,000

116.4

197.4

92%

181.6

2X-111

Glioblastoma and brain metastases from breast cancer

Phase Ib/II

25%

2025

$169,000

202.4

300.0

92%

276.0

Dovitinib

Renal cancer

Phase Ib/II

35–50%

2024–25

$145,000

176.9

619.3

63%

390.2

Total

1,290.7

Net cash/(debt) (Q219) (SEKm)

(20.1)

Total firm value (SEKm)

1,270.6

Total shares (m)

70.5

Value per basic share (SEK)

18.03

Warrants and options (m)

23.5

Fully diluted shares in issue (m)

94.0

Fully diluted value per share (SEKm)

15.16

Source: Oncology Venture reports, Edison Investment Research

Financials

The delays that we have incorporated in our model have substantially changed our near-term spending expectations. Because we no longer expect clinical progress in 2019 for Irofulven, APO010 and 2X-111, and we expect delayed progress on LiPlaCis, this has reduced our expected loss for 2019 to DKK104m from DKK190m. However, these costs are largely retained, just in later years. This has increased our expected financing requirement to DKK360m (from DKK310m), which we include as illustrative debt (DKK100m in H219, DKK260m in 2020). This financing requirement is solely to bring the company’s products to a Phase III ready state, where they can be out licensed, and we would expect substantially higher financing requirements if the company seeks to fully develop any programmes internally.

The company ended Q219 with SEK20.1m in net debt. This is also after the company completed a rights offering during the period, which raised DKK56m gross (DKK48.7m in cash and DKK7.7m in debt conversion). The company’s new CEO has suggested that the company immediately initiate another rights offering targeting SEK100m.

Exhibit 2: Financial summary

DKK000s

2017

2018

2019e

2020e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

5,145

2,147

3,646

3,646

Cost of Sales

0

0

0

0

Gross Profit

5,145

2,147

3,646

3,646

EBITDA

(23,794)

(32,258)

(116,407)

(131,190)

Operating Profit (before amort. and except.)

(23,848)

(32,471)

(114,942)

(130,132)

Intangible Amortisation

0

0

0

0

Exceptionals/Other

0

0

0

0

Operating Profit

(23,848)

(32,471)

(114,942)

(130,132)

Net Interest

(7,132)

(192)

(2,015)

(212)

Other

0

10,146

0

0

Profit Before Tax (norm)

(30,980)

(22,517)

(116,957)

(130,344)

Profit Before Tax (IFRS)

(30,980)

(22,517)

(116,957)

(130,344)

Tax

590

6,973

12,595

2,823

Deferred tax

0

0

0

0

Profit After Tax (norm)

(30,390)

(15,544)

(104,362)

(127,522)

Profit After Tax (IFRS)

(30,390)

(15,544)

(104,362)

(127,522)

Average Number of Shares Outstanding (m)

24.3

33.8

63.1

74.7

EPS - normalised (DKK)

(1.27)

(0.44)

(1.65)

(1.71)

EPS - IFRS (DKK)

(1.27)

(0.44)

(1.65)

(1.71)

Dividend per share (ore)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

4,883

237,096

239,508

238,490

Intangible Assets

135

236,733

236,692

236,692

Tangible Assets

4,424

363

2,816

1,798

Other

324

0

0

0

Current Assets

8,102

14,401

66,977

154,886

Stocks

1,048

0

0

0

Debtors

3,048

5,262

7,390

14,582

Cash

3,326

1,547

40,831

118,725

Other

680

7,592

18,756

21,579

Current Liabilities

(10,540)

(35,407)

(46,498)

(18,774)

Creditors

(10,540)

(16,515)

(46,498)

(18,774)

Short term borrowings

0

(18,892)

0

0

Long Term Liabilities

0

(34,234)

(158,709)

(418,709)

Long term borrowings

0

0

(121,908)

(381,908)

Other long term liabilities

0

(34,234)

(36,801)

(36,801)

Net Assets

2,445

181,856

101,278

(44,108)

CASH FLOW

Operating Cash Flow

(10,702)

(31,392)

(96,251)

(182,065)

Net Interest

(170)

(2,391)

(8,848)

0

Tax

2,527

6,159

(22)

0

Capex

0

0

(368)

(40)

Acquisitions/disposals

(784)

9,855

(3,758)

0

Financing

7,478

198

41,060

0

Dividends

0

0

0

0

Other

(308)

(3,299)

(75)

(102)

Net Cash Flow

(1,959)

(20,870)

(68,262)

(182,207)

Opening net debt/(cash)

(5,488)

(3,326)

17,345

81,078

HP finance leases initiated

0

0

0

0

Exchange rate movements

(203)

(199)

(47)

0

Other

0

398

4,576

102

Closing net debt/(cash)

(3,326)

17,345

81,078

263,183

Source: Oncology Venture reports, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Oncology Venture and prepared and issued by Edison, in consideration of a fee payable by Oncology Venture. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

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This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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General disclaimer and copyright

This report has been commissioned by Oncology Venture and prepared and issued by Edison, in consideration of a fee payable by Oncology Venture. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.